By Stephanie Yang and Kevin Baxter

Oil prices plunged to a two-week low Tuesday as traders expressed doubt that months of negotiations would lead major oil-producing nations to reach a deal to cut output at OPEC's Wednesday meeting.

Anticipation of action to limit output has boosted the crude market in recent weeks. But comments from officials ahead of the meeting sowed doubts over the Organization of the Petroleum Exporting Countries' ability to come to an agreement.

Light, sweet crude for January delivery declined $1.85, or 3.9% to $45.23 a barrel on the New York Mercantile Exchange, its lowest close since Nov. 14. Brent, the global benchmark, settled down $1.86, or 3.9%, at $46.38 a barrel.

A key concern for investors leading up to the meeting has been whether OPEC members Iran and Iraq will cooperate in the planned production cuts. While officials said Tuesday that the two countries have expressed willingness to keep output steady, worries over a potential deadlock are pressuring oil prices.

"With member delegations already gathered in Vienna ahead of [Wedneday's] formal meeting, it is increasingly clear that key divisions still remain," said Robbie Fraser, commodity analyst at Schneider Electric, in a note.

Germany's Commerzbank said the main hurdle for the meeting will be resolving conflicting demands from Saudi Arabia and Iran, with Saudi Arabia's insistence that Iran cap production while Iran seeks an exemption from the cuts.

Other members have expressed mixed feelings going into the meeting, contributing to volatility in the oil market. Sentiment has reversed substantially from a week ago, said Donald Morton, senior vice president at Herbert J. Sims Co., who runs an energy-trading desk.

"Wall Street has completely flip-flopped," Mr. Morton said. "I've never seen so many changes in opinion in such a short period of time."

Goldman Sachs analysts said the oil market reflects a 30% probability that the cartel will come to a deal Wednesday. On Tuesday, Macquarie analysts said the probability of a deal has fallen but still expect the cartel to arrive at an agreement.

In September, OPEC agreed on targets that would have translated into production cuts of 200,000 to 700,000 barrels a day. Analysts say that if the Wednesday meeting ends inconclusively, oil prices could fall to as low as $35 a barrel.

"I don't think OPEC can afford a complete fiasco here. If there is one, prices are bound to work lower," said Andy Lebow, seniorpartner at Commodity Research Group.

Most observers agree that Saudi Arabia wants a swift resolution, but Iran will likely wait until the formal meeting is under way before the country's negotiators show their hand.

Another challenge for the production accord is Russia, which isn't an OPEC member. Russia has indicated it is only interested in holding production at 11.2 million barrels a day. A freeze, it said, is essentially a reduction because it planned to increase output next year.

OPEC will also struggle to nail down production quotas for member nations as several countries, such as Nigeria and Libya, have requested exemptions because their oil production and exports have been hurt by militant attacks. In addition, OPEC doesn't have the authority to make members comply with their production assignments.

If OPEC decides to abandon its pledge to cut output, oil prices will be hit hard in the short term.

However, Bjarne Schieldrop of Swedish bank SEB said the market was likely to shrug off the setback and oil will likely trade back to around $48 a barrel by the end of 2016.

"Higher oil prices mean non-OPEC producers will be more encouraged to drill for more oil, which will increase global supply and prices will be depressed again," said Gao Jian, an energy analyst at SCI International.

In the U.S., where many oil producers were forced out of the market when prices dropped below $40 a barrel, there are signs of resilience. The latest forecasts from the U.S. Energy Department show domestic crude production is likely to hit 8.7 million barrels a day in 2017, 100,000 barrels a day higher than the previous estimate.

Production elsewhere is also climbing. North Sea producers, which have been troubled by rising costs and high taxes, recently increased output to a three-year high. That shows that any OPEC agreement would have a limited impact onthe global crude glut, said Hamza Khan, head of commodity strategy at ING Bank.

"The whole concept is so silly," Mr. Khan added. "If one part of the world cuts, supply will come online in other parts of the world...and it will come on very quickly."

Market players will also be following the weekly inventory report from the U.S. Energy Information Administration. Analysts and traders surveyed by The Wall Street Journal expect crude-oil stockpiles to rise on average by 100,000 barrels in the week ended Nov. 25.

Gasoline futures settled down 2.5% at $1.3771 a gallon, and diesel futures settled down 3.3% at $1.4627 a gallon.

Jenny W. Hsu and Timothy Puko contributed to this article.

Write to Stephanie Yang at and Kevin Baxter at

(END) Dow Jones Newswires

November 29, 2016 17:04 ET (22:04 GMT)

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